Making investments based on Gold-Silver ratio: Expert View


A prolonged focus on the prices of gold has been followed by a hike in the prices of other valuable metals like silver. Brokers who offer customers to invest in commodities have already issued a notification stating that investments in silver seems alluring. As per the analysts, weighing the prices of one metal against another could help investors to form an opinion of which one to buy or sell. For making such decisions, a method called the gold-silver ratio is applied. It determines the amount of silver it takes to buy a kilogram of gold. For instance, on 29 June, gold with a purity of 999 closed at ₹48,534 per 10 grams or ₹48,53,400 for a kilogram. And the silver prices on the same day closed at ₹48,556 a kilogram. The gold to silver ratio will be 48,53,400/48,556, which comes to 99.95.

Previously the ratio of the two metals remained at 62. “When the ratio is higher than the historical score, it means silver is undervalued. The present ratio is 99.95, indicates that silver is highly undervalued and the prices could rise from here on as the global economies slowly start their industrial activity,” says Ajay Kedia, director, Kedia Commodities, a commodities research firm. He also believes that gold prices would not rise majorly from here on and the “undervalued” silver prices could be on the growth. While these rates do have historical importance, other experts believe that investors should not just rely on them completely, either to stop investing in gold or take strategic exchange to silver. “An investor should not rely on such ratios solely to take bidding on investments. They work only when other conditions support the price movements,” says Gnanasekar Thiagarajan, co-founder and CEO, Commtrendz, a commodities research firm.

There are various means through which an individual can take exposure to gold, however, the possibilities to invest in silver remain limited. For gold, an individual can purchase sovereign gold bonds (SGB), gold bars, exchange-traded funds (ETFs), and even on payment apps such as Google Pay, Paytm and PhonePe. In order to invest in silver, a person would need to buy futures contracts on a commodity exchange. Companies such as Augmont have associated with payment apps for digital gold, also allowing investors to buy silver in small quantities on their websites and even sell them back on the platform.


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